Banking: Korean banks show highest ever capital adequacy ratios on BIS basis
The Financial Supervisory Service of Korea has released figures showing that Korean banks are, on the Basel test, the healthiest they ever have been.
FSS Statement 7 September 2011
The consolidated BIS capital ratio
* of bank holding companies in Korea recorded an all-time high by reaching 13.78% as of end-June 2011, up 0.24 percentage points from 13.54% at the end of the previous quarter
* The consolidated BIS capital ratio is the ratio of equity capital defined in the Basel II accord (tier 1
capital plus tier 2 capital minus deductions) to combined risk-weighted assets of a holding company
including the banking unit.
The consolidated Tier 1 capital ratio
* which is regarded as an indicator of the quality of capital was also up quarter on quarter by 0.21 percentage points from 10.29 to 10.50%.
* The Tier 1 capital ratio is the ratio of core capital (common stocks, hybrid capital instruments and other core capital elements) to combined risk-weighted assets of a holding company including the banking unit.
The surge in the ratios is attributable to an increase in risk-weighted assets including loans held by subsidiaries by KRW12.0 trillion or 1.3% from the previous quarter’s KRW92.49 billion. On the other hand, equity capital sharply increased by KRW3.6 trillion or 2.8% from the previous quarter’s KRW125.2 trillion, thanks to the increase in net income by KRW3.9 trillion due to better corporate earnings of subsidiaries and a
KRW1.1 trillion issuance of redeemable preferred stocks by bank holding companies.
(Note, due to Korea's use of American terms, "billion" and "trillion" in this release mean 1,000 million and one million million respectively instead of the correct one million to the power two and one million to the power three respectively. )
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